Tuesday 3rd May 2011
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The New Zealand dollar spiked at a new three-year high in the early hours of today against a weaker greenback, but spent the next 12 hours falling away again.
The kiwi pushed up to US81.19c about 3am, according to Reuters data, but fell away in the following hours to US80.66c at 8am, similar to its level at 5pm yesterday. It kept slipping though the day to bottom out at US80.13 just before 4pm, and then clawed its way back to US80.47c at 5pm.
The New Zealand currency was helped to its overnight heights by the US dollar slumping to a three-year trough against major currencies.
Data had showed US manufacturing expanded at a brisker pace than expected in April while another report showed construction spending rose at its fastest pace in 11 months in March.
"The reaction should reaffirm how difficult it is for the US dollar to get a sustained lift from strong growth and price numbers until such data starts to significantly pull forward US rate expectations," said Alan Ruskin, global head of G10 currency strategy at Deutsche Bank in New York. Factory good orders for March are expected to be released in the US trading tomorrow morning.
The NZ dollar was marginally higher at A73.71c against the Australian dollar at 8am and edged up to A73.75c at 5pm as the Australian dollar extended its slide against most major currencies when the Reserve Bank of Australia decided to maintain its benchmark interest rate unchanged at 4.75%, as expected.
Inflation in Australia rose more than expected in the first quarter of 2011, led by higher costs of food and fuel, but RBA governor Glenn Stevens said that the bank expected inflation to be close to target over the year ahead as temporary price shocks dissipated over the coming quarters.
The euro climbed to a 17-month high above US$1.49 after surprisingly strong European manufacturing data bolstered chances that interest rates in the euro zone will rise further but at 5pm was at US$1.4812, still ahead of the same time on Monday.
The NZ dollar edged down to 0.5438 euro at 8am from and kept falling to 0.5432 at 5pm. The kiwi edged lower to 65.52 yen at 8am, and dropped sharply to 65.18 yen at 5pm.
The trade weighted index was down to 68.42 at 5pm from 68.61 at the same time on Monday.
BNZ strategist Kymberly Martin said buoyant global commodity prices, stable risk appetite, and a broadly weaker US dollar appeared to be sufficient to keep the NZ dollar drifting higher against the greenback.
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